El Dorado County officials turned down $1.6 million in federal stimulus funds, leaving an ideologically diverse group, including affordable-housing advocates and local contractors, angry and perplexed.

The Board of Supervisors last week twice rejected what staff members described as no-strings-attached funding.

"It's as close to a no-brainer as I've ever seen come before this board," Richard Meagher of the Affordable Housing Coalition of El Dorado said of a grant application that could have put local contractors to work rehabilitating foreclosed houses and made the dwellings available to moderate and low-income homebuyers.

But Supervisor Jack Sweeney characterized himself as a "free-market person" and argued that many current economic ills are a result of government's intrusion into society.

"When people earn something, they appreciate it better," he said.

During their regular meeting Tuesday, the supervisors voted 4-1, without a staff presentation or discussion, not to join with the city of South Lake Tahoe in applying for Neighborhood Stabilization Funds.

But after receiving a stream of e-mail protests from constituents, some accusing the board majority of putting personal ideology above the good of the county, the supervisors convened a special meeting Thursday to reconsider.

Community leaders, affordable housing advocates, and representatives of the real estate and construction industries urged the board to accept the money.

The grant funds would be used to purchase and rehabilitate foreclosed homes, which would be resold to moderate and low-income homebuyers – those with household incomes that are 120 percent or less of the area's median income.

On the county's west slope, the funds would be directed to five areas identified by the Federal Housing Administration as the most affected by foreclosures: Cameron Park-Shingle Springs, Diamond Springs, El Dorado Hills, Georgetown and Pollock Pines.

County staff member Shawna Purvines said 246 homes are in foreclosure in the target areas, and 189 potential homebuyers have been prescreened for eligibility and are on the county's waiting list.

All funds would have to be spent by Sept. 30, 2011. But until then, money from the sale of each home would be returned to the local program to buy, rehabilitate and restore additional houses.

Purvines estimated between eight and 18 houses could be rehabilitated and sold during that period.

Homes sold under the program would remain income-restricted for 20 years, she said, providing the county with long-term affordable housing stock.

"You don't often get the federal government to say that you don't have to compete for (grant funds), we're allocating it to you," said Nancy Kerry, housing manager for South Lake Tahoe. The city can't apply for the money without the county's participation.

Nonprofit housing firms and local contractors would take charge of the projects, and the county would be reimbursed for monitoring their activities.

But Sweeney noted that under the federal program contractors would have to pay prevailing wages for the Sacramento area, which typically are higher than those in El Dorado County. He, along with Supervisors John Knight and Ron Briggs, argued that such projects were better left to private investors.

The El Dorado Builders Exchange, which represents local contractors, urged support for the program, arguing that it would create jobs and rehabilitate vacant homes that might otherwise be vandalized.

Real estate agent Judy Mathat said that in addition to helping meet the demand for moderate and low-income housing, the program would provide work for contractors, real estate agents and people in related businesses, and possibly help them keep their homes out of foreclosure.

The public arguments swayed Supervisor Ray Nutting, who described his vote Tuesday as a "wobbler."

"If we don't collect our fair share (of tax money from Washington), our fair share goes someplace else," he said.

He joined South Lake Tahoe-area Supervisor Norma Santiago in urging support for the grant application. But the proposal was defeated on 3-2 vote, with Sweeney, Ron Briggs and John Knight voting against.

Call The Bee's Cathy Locke, (916) 773-6866.